Time for a regulatory review of online contracts & practices

The Consumer Protection Act 2007 was a major reform of Irish consumer law with predictably European foundations, but has had very little impact in Ireland. It is rarely enforced in any meaningful way and the lack of court cases mean it is underdeveloped, despite the Act having wide-ranging provisions, extensive criminal offences and enforcement powers and even rights for consumers to seek damages for its breach.

Given the scope of the legislation, which covers marketing, sales, pricing and contract practices, it is not hard to find consumer situations in Ireland where the Act applies but is not enforced or respected. Undisclosed advertorial, for example, is a frequent and ongoing source of controversy that came into focus with undisclosed celebrity and sportsperson endorsements but has become a bigger issue with the rise of social media influencers. Regular calls to “do something” or to provide “clarity” on the rules are usually framed in the terms of non-binding ASAI rules rather than the actual legal provisions of the Act which have a direct bearing.

Another consistent issue is contract and subscription services that can be set up online or in-app but which have complicated or disproportionately inconvenient cancellation requirements, the main culprits being online publications and utility companies. There is no fair reason for requiring someone to ring up to cancel, or to write in by post for example, other than to capitalise on inertia. In one example I have seen, customers can cancel by clicking a link in their account but that merely prompts the trader to call the customer to confirm – an unnecessary extra step which does nothing more than provide the trader with another opportunity to cajole the customer not to cancel, but which also raises contractual difficulties in determining the cancellation period.

The Act prohibits a range of commercial practices, including aggressive commercial practices. These are practices which, if by harassment, coercion or undue influence, would be likely to:

cause significant impairment of the average consumer’s freedom of choice or conduct in relation to the product concerned, and

cause the average consumer to make a transactional decision that the average consumer would not otherwise make.

This may not immediately seem relevant to cancellation practices, but the Act goes on to say that in determining whether the commercial practice employs harassment, coercion or undue influence, a number of things shall be taken into account, including the imposition of onerous or disproportionate non-contractual barriers by the trader when the consumer wishes to terminate the contract, exercise a contractual right or switch to another product or trader.

In 2011, the Bulgarian Supreme Court found that burdensome termination requirements effectively trapped consumers in automatic renewals of a service, amounting to an aggressive commercial practice. It is worth noting that, in Ireland, aggressive consumer practices are not just prohibited, they are a criminal offence. The penalties under the Act can be serious, ranging up to a fine of up to €5,000 or imprisonment for up to 12 months on summary conviction or up to €60,000 and 18 months on indictment.

The history of Irish regulatory law and enforcement, particularly in consumer law, suggests that prosecutions will continue to be rare and even if brought to conviction penalties will be at the low end of the scale. However, Irish consumers are entitled to a more activist consumer regulator monitoring terms and conditions and trader behaviours, particularly given that the lack of class action structures in Ireland means that the civil remedies in the Act are usually not cost-effective to invoke, devaluing another incentive for traders to improve behaviour. I have had District Court cases with awards of aggravated damages in the region of 25% due to misleading commercial practices, but the consumers involved had significant contractual claims to begin with. For most, private enforcement of a breach of the Act will not be worthwhile.

The merger of the under-resourced Competition Authority with the under-resourced Consumer Agency to form the Competition and Consumer Protection Commission has continued the trend of insufficient enforcement and monitoring of both areas of the law, but the emphasis remains on competition and merger control.

The Commission has only published lists of consumer protection enforcement measures taken up to the end of 2016 and for that year it reports 40 enforcement actions, but which cover only 7 categories of consumer law breaches and only three categories of remedial action (none of which were prosecutions). From 2012 to 2016 one major Irish retailer appears on the enforcement list 40 times, with some entries relating to multiple offences. Only one conviction is recorded, in the 2012 enforcement list. It would appear that fixed payment notices and other minor measures are a mere cost of doing business, rather than something that leads to an improvement for consumers.

The most commonly enforced rules are those prohibiting the car “clocking” and price display regulations. However, a significant amount of consumer disposable income is likely now spent on daily transactions, particularly through mobile internet use, which involve lengthy contracts with detailed terms and conditions. It is time for a detailed study of these terms and practices to check for compliance with the Act and a number of other relevant pieces of consumer legislation.